What does the Housing and Planning Act really mean for housing associations?

Almost a full year since lamenting the many ‘unanswered questions’ over the then proposed legislation, David Baybut revisits the Housing Planning Act 2016 to examine the impact on housing associations.

While the Chartered Institute of Housing – the professional body for housing – has welcomed the Government’s “ambition to…increase levels of house building” and “reverse the decline in home ownership”, it remains concerned about the “ongoing loss of social rented housing, a problem which will be exacerbated by some of the measures in the Act”.

The Institute has warned that, based on its research, the effect of the new legislation could result in 370,000 fewer homes for social rent by 2020, versus 2012.

So – how does each significant element of the new law affect housing associations?

Voluntary Right to Buy

The law now allows for the Voluntary Right to Buy agreement between housing associations and the Government and concentrates on how housing associations will obtain the necessary compensation for selling homes. Along with giving the Government the right to produce a “home ownership criteria” – rules governing the right to buy extension – the Act gives the Secretary of State powers to instruct the Homes and Communities Agency to oversee how closely housing associations are complying. Criticism of Right to Buy focuses on whether replacement homes for those sold will be like-for-like (i.e. social rent for social rent).

Sale of vacant, higher value local authority homes

The Government proposal to compel local authorities to sell vacant, high value homes in their ownership is now law. This will involve a definition of “higher value” and means local authorities will need to consider selling such homes when vacant. What that definition is and how Government will calculate what authorities will pay to the Treasury will be discussed in Parliament before implementation. Ultimately, the idea is to use this income to fund extending the right to buy to housing association tenants and to replace higher value homes with another affordable home. However, in London, there will be a two-for-one replacement of local authority homes sold.

The Chartered Housing Institute has questioned whether revenue generated from higher value sales will compensate housing associations for right to buy discounts and fund replacement homes, suggesting that up to 7,000 rental homes could be lost per year without additional funding.

When debated in the House of Lords before the Act became law, Lord Bob Kerslake commented: “In the competing demands of funding the extension of Right to Buy and funding the replacements, replacements will come a very clear second. Local authorities will have to draw on their very own scarce resources if replacements are to be built”.

Pay to Stay

The Pay to Stay measures – in which local authority tenants with a higher income are obliged to pay more rent – are only voluntary for housing associations. However, if they decide to initiate a Pay to Stay scheme, a so-called higher income is rated as a household earning more than £31k per year (£40k in London). The Government is expected to review the definition at set periods in line with inflation.

The rental uplift for higher earning tenants is based on 15 pence extra rent for every pound earned above the agreed threshold – though this doesn’t affect tenants on housing benefit – and any additional rental income goes back to the Treasury. The estimated timeline for the Pay to Stay element of the Act to take effect is April 2017, or even later. The Government has said that Pay to Stay will create “a fairer social housing sector that supports those people who genuinely need it” while the Chartered Housing Institute believes many households who “cannot be reasonably classed as ‘high earners’ will be affected” and that this will “lessen incentives for working tenants to increase their income”.

Starter Homes

Homes for sale at below-market rates – otherwise known as starter homes aimed at first time buyers aged between 23 and 40 – are now part of the law which requires local authority planners to promote the sale of starter homes in their area. The government said that starter homes were a key part of the Conservative manifesto to increase home ownership and the law also means Government can stipulate that starter homes are included on residential sites as part of obtaining planning permission, though this doesn’t apply to rural exception sites.

Criticism of this policy is based on the point that such homes will not be affordable to everyone, and a Labour peer, Lord Jeremy Beecham, has said that starter homes are “a costly approach to a massive housing problem for the benefit of only one section of the population…at the expense of people whose own needs and aspirations will continue to be unmet”.

Fixed term tenancies made mandatory?

Housing associations are not affected by this section of the Act, in which fixed term tenancies of between two and 10 years become obligatory for most new local authority tenants. In fact, associations will have the discretion to adopt both assured or fixed term assured shorthold tenancies.

Planning

Changes to the planning system relevant to housing associations includes a new register of brownfield land and power for local authorities to grant planning permission in principle.

Deregulatory measures

The Government added a range of amendments to the Housing and Planning Bill to reverse regulations created by the Office for National Statistics (ONS) reclassifying housing associations as public bodies.

In effect, the deregulatory measures are good for housing associations and bolster the control of boards in decision making. The measures now made law by the Act include:

Changes to the way local authorities are involved with Large Scale Voluntary Transfer (LSVT) housing associations.

Creation of a special administrative regime for housing associations that become insolvent.

Removal of Government powers of consent over the disposal of vacant or tenanted housing association property.

Removal of artificial restrictions on the valuation of housing association homes transferred from a local authority.

Removal of Government control over voluntary winding up, dissolution and restructuring of housing associations.

Limitations to the regulator’s authority to appoint officers and managers